ARTICLE 12
Interest
(1) Interest arising in a Contracting State and paid to a resident of the other Contracting State
shall be exempt from tax by the first-mentioned Contracting State.
(2) Paragraph (1) shall not apply if the recipient of the interest, being a resident of one of the
Contracting States, has a permanent establishment in the other Contracting State and the
indebtedness giving rise to the interest is effectively connected with such permanent
establishment. In such a case, the provisions of Article 8 shall apply.
(3) Where, owing to a special relationship between the payer and the recipient or between
both of them and some other person, the amount of interest paid, having regard to the debt-claim
for which it is paid, exceeds the amount which would have been agreed upon by payer and the
recipient in the absence of such relationship, the provisions of this Article shall apply only to the
last-mentioned amount. In that case, the excess part of the payments shall remain taxable
according to the law of each Contracting State, due regard being had to the other provisions of
this Convention.
(4) The term “interest” as used in this Convention means income from bonds, debentures,
Government securities, notes, or other evidence of indebtedness, whether or not secured and
whether or not carrying a right to participate in profits, and debt claims of every kind, as well as
all other income which, under the taxation law of the Contracting State in which the income
arises, is assimilated to income from money lent.
(5) Interest shall be treated as arising in a Contracting State only if paid by such Contracting
State, a political subdivision or a local authority thereof, or by a resident of that Contracting
State. Notwithstanding the preceding sentence-
(a) If the person paying the interest (whether or not such person is a resident of
one of the Contracting States) has a permanent establishment in one of the Contracting
States in connection with which the indebtedness on which the interest is paid was
incurred and such interest is borne by such permanent establishment, or
(b) If the person paying the interest is a resident of one of the Contracting States
and has a permanent establishment in a State other than a Contracting State in connection
with which the indebtedness on which the interest is paid was incurred and such interest
is paid to a resident of the other Contracting State, and such interest is borne by such
permanent establishment,
such interest shall be deemed to arise in the State in which the permanent establishment is
situated.